BRE following Handlobank's, Millennium's lead in retail market
So BRE plans to turn up the heat under the retail banking market by following the lead of its competitors and creating BRE 7, the Business Journal has learned.
Warsaw-based BRE plans by the end of this year to open 60 small, automated branches in large Polish cities.
These branches will be similar to Handlowy's Handlobank and BIG BG's Millennium, both of which began appearing late last year.
The first 15 BRE 7 branches will open in Warsaw in early autumn, according to sources close to the bank. BRE's network-monitoring center will be located in lodz, and Andersen Consulting has won the tender to install its Altamira software.
Although BRE is coming in behind Handlobank and Millennium with a similar concept analysts don't believe it's too late or that the market is saturated.
"I wouldn't say the market is too crowded," said Artur Szeski, banking analyst with CDM Pekao. "There is still enough space for a new player, provided everything will be done in the right way."
BRE, in Szeski's opinion, has the potential to do it right. Although the bank's primary focus has been on corporate and investment banking, it has proved it can run a successful private banking practice.
"I'm rather surprised that they are so successful," Szeski said. "This is a difficult area, with strong competition."
At the end of last year, BRE's deposits from individual customers amounted to zl. 1 billion ($285 million), Szeski added. By comparison, Bank Pekao had zl. 20.5 billion ($5.8 billion) at the end of 1998.
BRE had last year announced that it planned to expand into retail banking, but the move toward small, fully automated branches is a surprise tactic. The bank had originally planned to expand its retail reach through acquisitions rather than a greenfield approach.
On several occasions, BRE officials spoke of interest in the soon-to-be-privatized Bank Zachodni, which has 170 branches, primarily in western Poland.
But Zachodni is far from a certain bet. It is the last of the large state-owned banks undergoing privatization in the near future. Two other state-owned giants, Powszechna Kasa Oszczednosci Bank Panstwowy (PKO BP) and Bank Gospodarki Zywnosciowej are still in need of vast restructuring and are not expected to be sold before 2000-2001 at the earliest.
Because it is the last privatization chance for now, the list of potential suitors is long with about 20 Polish and foreign financial institutions expressing interest.
By moving into retail through a start-up approach, BRE will be able to get its activities off the ground faster than through an uncertain privatization tender. And by moving into retail, it joins a growing list of Polish banks that have taken similar steps to broaden their business base and secure a cheap funding pool.
BRE is traded on the Warsaw Stock Exchange (WSE) and is 48.74% owned by Germany's Commerzbank. Its current retail network consists of 21 traditional branches.
The bank already has extensive holdings in other financial service areas. The BRE Capital Group consists of National Investment Fund (NIF) No. 1 management company BRE/IB Austria Management, BRE Leasing, consulting company Business Management & Finance (BMF), consulting company FAMCO, factoring company POLFACTOR, accounting firm BRE Rachunkowosc, mutual fund Skarbiec, a company providing financial intermediary services FINOKO, asset management company AMBRESA, pension fund Skarbiec-Emerytura, financial security BRE Services Assistance and consumer finance company BEST. BRE is also in the process of setting up a mortgage bank.
In a Jan. 21 report on emerging Europe banks, Merrill Lynch gave BRE an "accumulate" recommendation, calling it a top pick among banks in this region.
According to the report, after a rather poor 1999 due to pension fund company start-up costs, a strong recovery is expected in 2000 driven by volume growth. The report doesn't specify BRE's retail banking expansion plans, but lists three channels for growth in this area: the private banking franchise; the takeover and restructuring of BEST; and the launching of the private pension fund management company.
"With BRE's proven management team and successful track record of entering new customer segments (e.g. private banking), we are comfortable with our projected 15%, five-year, real-earnings-per-share growth," the report says.
In 1998, BRE generated zl. 205 million ($58.6 million) in net profit, a 40% increase compared to the previous year. Last spring, BRE Bank bought corporate bank Polski Bank Rozwoju (PBR), beating out Sweden's Skandinaviska Enskilda Banken (S-E-Banken) and Germany's Bayerische Landesbank (BLB) in a tender. The merger was finalized in autumn, creating the fifth-largest bank in Poland with total assets of zl. 8 billion ($2.31 billion) and the fourth-largest brokerage house with 20% market share.
Warsaw-based BRE plans by the end of this year to open 60 small, automated branches in large Polish cities.
These branches will be similar to Handlowy's Handlobank and BIG BG's Millennium, both of which began appearing late last year.
The first 15 BRE 7 branches will open in Warsaw in early autumn, according to sources close to the bank. BRE's network-monitoring center will be located in lodz, and Andersen Consulting has won the tender to install its Altamira software.
Although BRE is coming in behind Handlobank and Millennium with a similar concept analysts don't believe it's too late or that the market is saturated.
"I wouldn't say the market is too crowded," said Artur Szeski, banking analyst with CDM Pekao. "There is still enough space for a new player, provided everything will be done in the right way."
BRE, in Szeski's opinion, has the potential to do it right. Although the bank's primary focus has been on corporate and investment banking, it has proved it can run a successful private banking practice.
"I'm rather surprised that they are so successful," Szeski said. "This is a difficult area, with strong competition."
At the end of last year, BRE's deposits from individual customers amounted to zl. 1 billion ($285 million), Szeski added. By comparison, Bank Pekao had zl. 20.5 billion ($5.8 billion) at the end of 1998.
BRE had last year announced that it planned to expand into retail banking, but the move toward small, fully automated branches is a surprise tactic. The bank had originally planned to expand its retail reach through acquisitions rather than a greenfield approach.
On several occasions, BRE officials spoke of interest in the soon-to-be-privatized Bank Zachodni, which has 170 branches, primarily in western Poland.
But Zachodni is far from a certain bet. It is the last of the large state-owned banks undergoing privatization in the near future. Two other state-owned giants, Powszechna Kasa Oszczednosci Bank Panstwowy (PKO BP) and Bank Gospodarki Zywnosciowej are still in need of vast restructuring and are not expected to be sold before 2000-2001 at the earliest.
Because it is the last privatization chance for now, the list of potential suitors is long with about 20 Polish and foreign financial institutions expressing interest.
By moving into retail through a start-up approach, BRE will be able to get its activities off the ground faster than through an uncertain privatization tender. And by moving into retail, it joins a growing list of Polish banks that have taken similar steps to broaden their business base and secure a cheap funding pool.
BRE is traded on the Warsaw Stock Exchange (WSE) and is 48.74% owned by Germany's Commerzbank. Its current retail network consists of 21 traditional branches.
The bank already has extensive holdings in other financial service areas. The BRE Capital Group consists of National Investment Fund (NIF) No. 1 management company BRE/IB Austria Management, BRE Leasing, consulting company Business Management & Finance (BMF), consulting company FAMCO, factoring company POLFACTOR, accounting firm BRE Rachunkowosc, mutual fund Skarbiec, a company providing financial intermediary services FINOKO, asset management company AMBRESA, pension fund Skarbiec-Emerytura, financial security BRE Services Assistance and consumer finance company BEST. BRE is also in the process of setting up a mortgage bank.
In a Jan. 21 report on emerging Europe banks, Merrill Lynch gave BRE an "accumulate" recommendation, calling it a top pick among banks in this region.
According to the report, after a rather poor 1999 due to pension fund company start-up costs, a strong recovery is expected in 2000 driven by volume growth. The report doesn't specify BRE's retail banking expansion plans, but lists three channels for growth in this area: the private banking franchise; the takeover and restructuring of BEST; and the launching of the private pension fund management company.
"With BRE's proven management team and successful track record of entering new customer segments (e.g. private banking), we are comfortable with our projected 15%, five-year, real-earnings-per-share growth," the report says.
In 1998, BRE generated zl. 205 million ($58.6 million) in net profit, a 40% increase compared to the previous year. Last spring, BRE Bank bought corporate bank Polski Bank Rozwoju (PBR), beating out Sweden's Skandinaviska Enskilda Banken (S-E-Banken) and Germany's Bayerische Landesbank (BLB) in a tender. The merger was finalized in autumn, creating the fifth-largest bank in Poland with total assets of zl. 8 billion ($2.31 billion) and the fourth-largest brokerage house with 20% market share.
